java

Intro

Michael Schwartz: Hello and welcome to Open Source Underdogs. I’m your host Michael
Schwartz, and this is episode 47 with Tracy Miranda, Director of Open-Source
Community at CloudBees.

CloudBees is a company behind Jenkins, the famed
project, which is used to automate building, testing and deploying software.

Many commercial and open-source projects use
Jenkins as part of their continuous integration and delivery infrastructure,
including my company Gluu.

Jenkins was forked from a project called Hudson,
started by Sun Microsystems in 2005. After Oracle acquired Sun, Hudson was forked
and rebranded as Jenkins.

Tracy has been an entrepreneur, a developer, a
technologist for around 20 years. She was active in the Eclipse community, serving
on the board of directors. She’s also one of the founders of the Continuous Delivery
Foundation, which operates under the Linux Foundation.

Hopefully that gives you a little background, so
let’s get on with it. Here’s Tracy. Thank you so much for joining today.

Tracy Miranda: Thanks, Mike. It is my pleasure to be here today.

Joining CloudBees

Michael Schwartz: For 10 years, you founded and ran your own consultancy,
specializing in Eclipse development – how did you end up getting involved in CloudBees?

Tracy Miranda: Yes. I think the
common thread there is definitely open source. So, I think that’s something
early on in my career I’ve always been drawn to, especially because of the innovation
that you find with open-source communities. And it came at a time I was looking
to just make a change in the career and focus a bit more on some of the
community building aspects.

And as I was talking to people out in the industry, I got introduced to Kohsuke Kawaguchi, who’s the creator of Jenkins, and at the time was the CTO of CloudBees. And the more he talked about the next stage of CloudBees, and what he wanted to do with Jenkins, the more exciting it sounded to me, so I could not resist the opportunity to join his team and lead the open-source team and try that future direction.

History of CloudBees

Michael Schwartz: So, for the non-geeks in the audience, can you talk a little bit about the history of Jenkins, and how that impacted the development of CloudBees?

Tracy Miranda: Yes, yes. So, Jenkins is a built automation server. It is most
commonly used for continuous integration and continuous delivery, which are big
parts of delivering software. So, it’s a tool that’s been around for 15 years.
Many might know it originally in its first incarnation as Hudson, but it
evolved over the years and became Jenkins and became very rapidly adopted by
developers and focused on delivering software everywhere, just because it gave
you a lot of flexibility.

And it was the first tool that sort of helped
you integrate and build your software. And it was really what we’d say is the start
of this whole field of developer productivity engineering.

And around it, so companies like CloudBees
emerged, offering more Enterprise version. So, when it came to scaling or
features around governance and securities, and CloudBees would offer Enterprise
Jenkins. And that’s just sort of evolved and evolved, and now the whole space is
currently really doing very well as we deliver more and more software every
day.

CloudBees Products

Michael Schwartz: So, CloudBees has a number
of products and services. For 2020, what are the most important products,
with regard to revenue, and what are the most important projects for your
future growth?

Tracy Miranda: In 2020, well – let me talk about the direction
we’re going first of all, and then I can bring that back to the present – so,
we see just everybody’s delivering a lot more software, and software has become
critical to every industry. So, you know, whether it’s a bank or a travel
company or insurance company – you name it – software’s a differentiator for
them. So, the more software we have, the more we kind of start to talk about
like software factories. And you can use the factory metaphor as well to apply
it to this.

So, in that model, we
talk about Software Delivery Automation, and Software Delivery Management
automation is just – the name says it all – it’s everything you need to do to
get the software delivered, pretty much like a factory. And then, the Software
Delivery Management, or SDM, is the part where you have the business
intelligence coming in, how do you make the decisions, what to release when, and
to who. So, that’s the direction we’re headed in, and we’re building out all
the different parts that contribute to integrating all the tools.

Today, what a lot of companies have is basically focused on continuous integration and continuous delivery, so, tooling around tools like Jenkins, we also have SaaS versions of CICD tools, and then, any tools that help you deliver faster. So, we’ve got a whole kind of portfolio, depending on your flexibility and what you’re trying to achieve.

Market Segmentation

Michael Schwartz: CloudBees is in a very horizontal market. As you mentioned,
you are serving customers in basically every industry. Given that, does
CloudBees segment solutions or the marketing effort, either vertically, or by
use case, or in any other way?

Tracy Miranda: I think probably the most clear segmentation, which we will kind
of see, is whether people want to manage it and have things kind of on-premise
themselves, or whether they want software-as-a-service. So, that tends to be a
key differentiator.

And oftentimes, it will depend on the industry. So, certain industries might have very strict compliance or governance around it. So, perhaps, it always has to be an in-house solution. But then, perhaps some new startups, so, in different segments can afford to go with much more as a service model, where they don’t really want to deal with the nuts and bolts, and the upgrades and the security patches – they’re just happy to focus on what they need to do to get their software out the door.

Why Open Source

Michael Schwartz: Without open source, there probably would be no Jenkins, at
least as it currently exists. And
therefore, I guess perhaps no CloudBees. But going forward, why does continuing
to invest and contributing to an open-source community materially help the
business?

Tracy Miranda: This is my key
role at CloudBees is, it’s kind of overseeing the whole open-source strategy.
So, you’re absolutely right, CloudBees is based on this massive open-source
project, and as we grow and continuing to evolve, we’re going to do a lot more
in open source and in different ways.

I think there’s lots of different benefits we
see to open source, so, on one side, if you take kind of just the engineering
side, there’s obvious benefits from working with the community – you’d get fast
feedback, you’d get people contributing.

A lot of the developers we hired in the early
days would come from open-source communities, and then they’d even have the
advantage of they are already up-to-speed with the processes and the ways of
working and the code base.

But then, there’s also other kind of strategic
science to open source as well. Open-source projects tend to spread like
wildfire, I had someone using the term, kind of the open-source tsunami. And
they have a tendency to change the direction of industries, to take something
like Kubernetes, which caused a big shift in the whole sort of cloud
infrastructure.

So, in that way, we also kind of look at technologies for them to be open and for them to drive the future direction of the industry and help us to get to an innovative place. So, we always want to be involved with open source and find ways to just create those kind of win-win situations for both the community and the company.

Open V. Commercial Features

Michael Schwartz: You mentioned previously that it was an Enterprise version of Jenkins, and I’m wondering about, today, is there still software that’s non open source, and if so, how do you decide what to open-source and what to keep private?

Tracy Miranda: Yes. I know that’s a key thing, and it’s constantly evolving. So,
we have an internal process, and we’ll kind of look at the way things are
evolving in the market. In general, like you take something like Jenkins, and
we have a lot of plugins added by different groups and different individuals in
some cases.

One thing that CloudBees do is, for the software
like CloudBees Core, or CloudBees CI built on top of Jenkins, is we also offer
kind of tiers of plugin, so we know which ones meet a certain level and meet
the requirements for Enterprise type customers.

So, this is focused specifically on things like security and governance and running things at scale. So, typically features in those areas, or verifying plugins, will be the areas we’ll tend to kind of have as the more closed source. And anything developers tend to use, this tends to be pretty open.

Open Source Strip Mining

Michael Schwartz: I’m sure you’ve heard this term “open source strip mining”, where large companies take open-source software projects and commercialize them. You know, you have a SaaS, you are offering themselves, but is this something that you’re concerned about, or any thoughts about this sort of phenomenon?

Tracy Miranda: I’ve definitely heard the term, yeah, it’s a pretty controversial one. But I think it is something that is always a consideration. So, you take something like Jenkins X, which is a new open-source project. It’s not related to Jenkins, as the name might indicate, but it’s actually a complete new CICD tool based on Kubernetes. And it’s one of the best ways to do Cloud Native CICD.

So, a lot of Jenkins X is open source, and you
could conceivably imagine another company taking it and wrapping it up and
delivering it in a specific way, but I think the reality is that open source is
always evolving. And it’s more about kind of the vision in the direction it’s
going. And the key thing I guess from CloudBees’ perspective is, we have a lot
of the people who are driving that direction working for CloudBees.

So, I guess that the people, at the end of the day, are a secret source. So, even if other people want to come and extend it or do it in a different way, I think we’re always kind of focused on what’s the vision, how is this going to evolve, how we’re going to keep pushing the industry forward. It’s a concern, but we try not to spend too much time focused on that, just more time focused on what do the users want and where are we headed.

SaaS V. License?

Michael Schwartz: In terms of monetization strategy, is the Enterprise license the majority of the revenues, or is SaaS the biggest part of the revenue stream?

Tracy Miranda: Yes. Enterprise licenses are definitely the main focus. I think that will evolve over the next set of years, but, for now, that’s certainly the case.

Pricing

Michael Schwartz: Few questions about pricing, which is hard for a lot of startup entrepreneurs. Many organizations are using Jenkins for free – is it hard to move these customers to a paid offering? What type of gates do you define? Is it per developer? And is pricing still evolving with new offerings, or have you achieved some stability in the pricing area?

Tracy Miranda: Yeah. No, I think this is an area constantly evolving. You know,
Jenkins is a great tool, and a lot of people can do a lot of things with that
anyway. So, we’re always looking to add value on top of that. So, we find a lot
of the customers who see the value of CloudBees, they’re focused on what they
need to do as a business, they don’t really want to be messing around CICD is
not their value add, so they want kind of the complete package. And that
includes the ability to get support and the ability to know things are going to
work for them.

When you are sort of doing things in open source
by yourself, you tend to run the risks yourself. You can pick up plugins and
you have to decide, are these going to work for me, are they going to have the
security patches attached. And what happens if something goes wrong? You know,
you can’t pick up a phone and kind of call up the open-source community and ask
them to fix your thing in a timely manner. That being said, it is a constantly
evolving space.

So, I think kind of the offerings and the bundling and the way that works is always evolving. And like we will do things as well, like offer kind of more analytics on top of that, which give people sort of more insights in what they can do with their systems, and yeah, that’s just constantly growing,

Partnerships

Michael Schwartz: What have been some of the more important partnerships for CloudBees in terms of specially impacting the business?

Tracy Miranda: In today’s world, I think you really can’t succeed as a company
on your own – we had a recent kind of partnership program, which I think we’ve
got a whole bunch of companies who we were working with. My
main tendency is to be on the open source and on the
Continuous Delivery Foundation – it’s not partnerships in the traditional sense,
but a lot of companies on the open-source side we’re working with closely.

And the other big one today is the partnerships with the cloud providers, and with those we have really strong relationships. I think every cloud provider has a marketplace out there, and you can easily access all CloudBees products very easily from the cloud marketplaces. I think this year we’ve also named the Google Cloud partner of the year, so, yeah, a lot of strong relationships, especially towards a whole Cloud space.

Project Governance

Michael Schwartz: You have a lot of experience in this area, so I can’t resist asking, but companies can host their own open source and build their own governance infrastructure around their project, or they can move to a foundation that can help maybe attract a larger community. What’s the strategy of CloudBees there, and how’s that evolved over the years?

Tracy Miranda: Yeah, a great question. So, Jenkins itself pretty much had its own governance, and that worked well and served the community really well for the first kind of ten, fifteen years. You know, it is very alike with model software in the public interest, it provides some great services. But, eventually, it got to a point where there was some kind of sticking points in the community. These were things sort of shared widely with the community.

Some key things like just having a business
entity so that we could get signing certificates, having a more kind of ability
to hire for roles that want developers, but other kind of things that are key
to software projects, but you don’t necessarily get contributions for. And
again, the ability to build a bigger community.

So, these are kind of some of the limitations
that we hit. So, Jenkins got to a scale, where it needed to grow past that and
to get companies interested and understanding it, they needed a really kind of
known model, which is why it then looked at setting up Jenkins in an
open-source foundation. And that led eventually to the Continuous Delivery
Foundation forming, which is, as the more we talked to folks, the more it made
sense, not just to have a single project foundation but to have something where
a bunch of folks could come together and work towards a bigger vision.

So, that’s been the key thing. The creation of the Continuous Delivery Foundation is what have helped launch over the last year. And that’s been a major kind of change, both for Jenkins and for CloudBees as a business.

Fostering Diversity at CloudBees

Michael Schwartz: You have been an advocate for a
diversity. And I am wondering have you been able to have an impact on how
CloudBees builds the team?

Tracy Miranda: Yeah, I think diversity is super important for all sorts of
reasons, but especially for business ones. I am very lucky in my position, I
head up the open-source team, I’m a hiring manager, so, in a great position to
kind of influence that at CloudBees.

So, I have a great team, and I’m happy to say
very diverse on kind of multiple accesses. You know, gender and age, and from
where we are across the world. So, that’s been really nice.

We also have lots of initiatives at CloudBees. One of the things I’m pleased to say is, there’s a lot of people doing things like CloudBees, and kind of constantly changing the status quo, which is nice, because it’s not always something I have to do, and then I can just kind of focus on my main job. But, yeah, a lot of great folks pushing things in the right direction.

Pandemic Impact On Diversity?

Michael Schwartz: We’re recording this episode in May of 2020, so the pandemic
is on everyone’s mind. It’s easy to look at all the negatives, but being an
entrepreneur, I think I’m inclined to look at positives. Is there any way we
can spin the pandemic as a positive around creating more diverse teams?

Tracy Miranda: That’s really interesting. But I think by moving online and by a
lot of companies had this almost artificial limit on, where people can be hired
from and all having to live in specific areas, which are often cities, which
often have big barriers to entry in some cases. I think by going virtual, you
do remove some barriers, you do make it easier for people to be hired from
wherever they are, and all of a sudden, that does open up the field for people
you can hire from. So, I think, in that way, it can be very positive.

How To Catalyze Gender Diversity In Tech?

Michael Schwartz: Just speaking from my
own personal experience, my company is very globally distributed in terms of
team members, we have team members from like every continent, except
Antarctica. So, we are doing an okay job in terms of diversity, but in terms of
getting more women on the team, we’ve faced some challenges.

I know you’ve talked a little bit about this topic, but maybe you can share why do you think there aren’t more women in tech, and what are some of the challenges that women face? And how can we maybe help more women get into the tech business?

Tracy Miranda: I spent a lot of time over the last three or four years trying to
understand for myself, because I think at the beginning of my career, I took it
a bit for granted. I thought this is just the status quo, this is how it is, but
I think it is down to kind of a number of factors all coming together. And you
know, unconscious bias tends to be a big feature.

We’ve got just a ton of research that shows how lots
of different things have compounded things over the year. I think there’s a
great NPR Podcast as well, which talked about the times of women started
dropping out of computer science courses. And it was almost because computers
in general were marketed towards boys. And it was very difficult for them to
sort of coming disadvantages to the
courses, and there was not a lot of empathy for that. So, I think that that’s
kind of one factor, but there’s a lot of other things in general that play out,
just networks and how people bring people into companies.

So, the good news is I think we have more
awareness than ever before of what it takes. And then, there’s a number of
things we can do. The bad news is, you almost have to keep at it constantly,
and things change very, very slowly. But we know, for instance, just
representation matters hugely. So, having more women voices, having more women
in higher position kind of modeling — I think there’s a great expression “You
can’t be what you can’t see.”

And then, just having more not just mentors for women but sponsors who are ready to kind of pull them up in the right channels, help them to get and meet their goals much faster. And I think we’re getting a lot more systematic approaches in place to do this. And actually, I was really glad to see with your podcast, you have a lot of the recent guests have been some very frankly incredible and awesome women. And I think that’s places you start, just having that representation, having those people talking and telling their story.

Advice For Open Source Startups

Michael Schwartz: Thank you. We are doing our best. So, last question, you run
your own company for a decade, and you’ve been around open source for a long
time, so I’m sure you’ve seen some successes and failures of entrepreneurs who
have tried to use open source as part of their business model. If you were
starting out from fresh today, you wanted to use open source and build a
business around it, do you have any advice for that person about how they
should go about it?

Tracy Miranda: I think there’s a lot that gets said about kind of open source
and the relationship with business models. I think I completely buy into it.
Building off open source has so many efficiencies and so much kind of leads to
a lot of serendipity.

I think you see a lot of startups today embracing
open source and understanding that it’s not just open source in the sense of
code, but what you’re really doing when you embrace open source is building out
a community. And I think people understand more than ever how key developers
are to any product and how key that community is.

So, not that open source is the only way to do it, but it’s such a great way to do it, and I think the main advice would be: if you’re doing it, you have to commit to it completely. You can’t kind of be half-hearted about open source, you have to commit to the vision and to the community and constantly growing it and tending to it like garden. And then, it will play huge dividends. And we have seen the companies who have done really, really well off open source. It’s just kind of really sort of impressive.

Closing

Michael Schwartz: Tracy, thank you so much for spending some time with us
today. And best of luck with CloudBees and with the Continuous Delivery
Foundation.

Tracy Miranda: Thanks very much for having me. It’s been great.

Michael Schwartz: Thanks to the CloudBees team for helping us to promote this episode on social media. Editing by Ines Cetenji. Transcription by Marina Andjelkovic. Cool graphics by Kamal Bhattacharjee. Music from Broke For Free, Chris Zabriskie and Lee Rosevere.

Intro

Mike Schwartz: Hello and welcome to Open Source Underdogs. I’m your host, Mike Schwartz, and this is episode 46 with Joe Duffy, Founder and CEO of Pulumi.

Pulumi is a platform that lets organizations
manage infrastructure in the cloud of their choice, using the coding platform
of their choice. It’s delivered as either a cloud service or a software. Joe’s
doing a fantastic job executing the Pulumi business plan. No point spoiling the
show for you – let’s just dive right in. Joe, thank you so much for joining the
podcast today.

Joe Duffy: Hey, Mike. I’m glad to be here, thanks for having me.

Pulumi Products

Mike Schwartz: In one of your past interviews, you described Pulumi as the name of the band, the name of the album, and the name of the song. We’ll take more into the business later, but can you describe the current Pulumi product offerings or maybe I should say super powers?

Joe Duffy: Yes, superpowers, yes. We just launched that sort of as a new
marketing theme for ourselves. We started Pulumi because we really have this belief
that everybody should be able to leverage the full capabilities of the cloud. The
cloud is kind of changing everything about how we build software, and yet, we
found that for most developers, the cloud was still sort of an afterthought,
which harkens back to the days of virtual machines and N-tier applications.

And on the other side, we found infrastructure teams that are, well, frankly using not-so-great tools, and really what we thought what Pulumi is, “Hey, we can bring decades of programming language innovation, and great tools, and developer platforms, and apply that to the cloud infrastructure space, and really supercharge people’s ability to use the cloud in how they build software. We’re also breaking down some of these barriers between the different sides of the organization.

So that’s our focus, you know, open source was super important to us from day one. And we offer a SaaS for teams and Enterprises that are adopting that open source.

Seismic Changes In Programming From 2004 To Today?

Mike Schwartz: You started at Microsoft in 2004 as a developer and went on to lead teams as a director of engineering. Looking back, what are some of the most fundamental changes in software development that you’ve seen over the years, or what would utterly shock the 2004 Joe Duffy?

Joe Duffy: I think you know a lot has surprisingly remained the same, but the cloud really is the biggest change – it changes everything about what we can do. It’s incredible when I look back, I think at 2004 even, and I was a developer before that, but really back then, like multi-core, multiprocessor systems wasn’t even a thing. And I spent actually a good deal in 2000 working on that.

The fact that every piece of software is a distributed application now, every piece of software has access to infinitely scalable compute and data, and AI, machine learning – all of these capabilities are just an arm’s length away.

Whereas, back then, I mean, we couldn’t even dream of using anything close to those sorts of capabilities. And I think that’s partially why we started Pulumi – we were excited about supercharging people’s applications with those capabilities.

Insights From Microsoft?

Mike Schwartz: From a business perspective, what would you say are some of
the most important things that you learned in your 12+ years at Microsoft, or
what was most helpful to you to lead Pulumi?

Joe Duffy: It’s definitely interesting, I did not plan on being there that
long. I was about to do my own startup before going to Microsoft, but I actually
went in part because I knew it was kind of like an extended MBA program for how
to build an Enterprise software company.

I think it sounds just, like seeing that sort of
innovation at scale, seeing how you keep existing customers happy while still
innovating and pushing the boundaries of what your platform can do was really
fascinating to see that at Microsoft, and to see how you can effectively
innovate and do research while you’re also doing product development. I think
that’s a really key thing to be able to do.

Also, a lesson learned over the years was, it was really hard to figure out kind of like what business units actually made money, how did they make money, and how did the money get redistributed across the company. I spent a fair bit of time just reading the PNL breakdowns, and all the investor statements, and trying to figure out, okay, what’s actually making money.

And the funny thing is, there’s a lot of lost leaders in a company like that. In fact, a lot of the open-source investments, frankly, are sort of lost leaders for the real money-makers, used to be Windows, now it’s more Azure at Microsoft specifically. But you see the same pattern, you know, AWS, Google, Cloud, other major players in the cloud, where a lot of the developer tools are really just there to get you to use and pay for their computing storage, and that was an interesting thing to see from the inside at that scale.

Marketing

Mike Schwartz: Pulumi is still a relatively new venture. The marketing team is probably trying to catch up with a momentum of product and engineering – what have been some of the challenges with messaging and extremely complex IT offering?

Joe Duffy: Marketing has been the one part of the company that is constantly changing. I think the product – we’ve really had a very product-led approach in everything we do. The community is everything for us, and so, we lead with the community and everything we do. Even revenue, we only started focusing on last year, and we’re finding that a very inbound-oriented model with open source and SaaS, being a great combination, is working well for us.

So, the challenge really is, how do we find the right people – and that is, the people for which Pulumi is a great solution – and tell them the right story at the right time. Because you can’t be constantly changing your cloud platform every day, so there are particular times we need to find people.

I think that’s been a bit of a challenge. You know, in the early days, it’s probably very common, we tried to tell a more exciting sort of long-term story than the product truth. Especially with the open source, I think you got to get the product truth story nailed first. And we got a little ahead of ourselves. Thankfully, we course-corrected after talking to a lot of end-users. And frankly, I just got out there and went to as many conferences and talked to people as possible – that helped to hone that product truth messaging.

And then, over time, I think you got to be patient. You’ll get there for the longer-term messaging, and it’s important that people know what your DNA and what your company stands for. But even more important than that, on day one, especially with open source, is to understand, what does this product do, why do I care. Especially in the cloud space, where it’s like, there’s a new open-source project every week, if not more frequently than that. And it’s a lot to stay on top of.

Value Prop

Mike Schwartz: So, that leads into my next question, which is, what are the most important value propositions for your customers today?

Joe Duffy: Yeah. We started out thinking they were all technical, and it turns out actually the cultural sort of human component is turning to be important for us. I think the first is, our two main customers, are practitioners, are infrastructure teams, dealing with complexity.

Modern cloud transformation is complex. I
mentioned it’s a difficult space to navigate, there’s so many options – many of
them don’t work at scale. So, Pulumi, for them, helps them tame the complexity
of modern cloud architectures, multi-cloud architectures, modern, even single-cloud
but increasingly multi-cloud. So, on the infrastructure team, that’s the thing
that’s really helping.

For developers, increasingly developers want to
use the cloud in their software. They don’t want to go learn this completely
foreign, frankly not as good toolchain. They’d rather just use the tools and
techniques that they know and love, and really start incorporating the cloud
more into their software. So, it’s great for them.

And then, if you look at the organization, it really helps those two sets of people collaborate and work together. And that’s the cultural part that’s actually fueling most of the growth within our existing customers.

Market Segmentation

Mike Schwartz: Do you segment the market at all? I heard in a previous interview, where you said at the time, you weren’t looking at vertical segmenting, but what about other ways, like size of customers, or how do you look at the market or break it down into something manageable or tackable?

Joe Duffy: This is something we’re learning over time. I think it’s naturally segmenting itself. We have an even spread of customers across SMB mid-market and Enterprise customers. And you know, the takeaway is, like, everybody’s doing cloud. So, everybody is a potential customer for us.

Honestly, running a company, it kind of makes it difficult sometimes to prioritize. The Enterprise needs are not always aligned with the community needs. And so, I think we’ve done a good job of balancing those. For example, we did SAML SSO identity integration very early on, which really was an enabler for us to add more Enterprise value-add features. So, we did a lot of the foundational work that helped us to cater to this broad spectrum.

I’ll also say, we see some verticals, just naturally emerging. And, again, they sort of fall along the same lines of what I was mentioning earlier. You know, folks that are doing modern cloud initiatives. And in certain industries, there’s more of that, like connected cars for example, we’ve got a number of customers in the connected cars vertical that we didn’t plan it that way, but it’s a great partnership with them.

I’d say that the number one thing though is, we listen to our customers, we listen to our community, and we try to let them take us where they need us to go.

Customer Interaction

Mike Schwartz: Interacting with different size customers can be a challenge. Large customers expect one level of support or integration and small customers another – have you seen a big delta there? Or, how do you manage the expectations for some of the larger customers who want more?

Joe Duffy: There’s definitely a very big difference in the engagement model. And I think for us, the key thing was community first for everything. So, we wanted to build a community, nurture the community, build a great community that has bodies or values and is a warm and welcoming place. And what that’s led to is, the community helps the community. And that helps actually, I mentioned this inbound model, where we’re really focusing on open source plus SaaS.

Our goal is that people can get up and running without needing a human to intervene, like they don’t actually need to talk to a sales person. They can download the open-source to get up and running very quickly. People tell us that getting and starting flow is one of the easiest they’ve ever experienced, and we spent a lot of time making sure that was the case.

We’ve got a community Slack, where literally thousands of people are helping each other, and the whole team is encouraged to participate. And so, that takes care of sort of that inbound transactional sort of customer and actually frees up our internal folks on customer pre-sales engineering and post-sales engineering, along with our sales force, to really focus more on those higher target accounts that do want a little bit more white glove service, might want to do a proof of concept, might want some more training and advice as part of the evaluation.

Monetization

Mike Schwartz: Let’s talk a little bit about monetization. Previously, I guess, you had a consumption-based model, where you were pricing based on number of services, but you’ve moved to a per developer pricing model. I’m actually curious, why didn’t the consumption-based approach work?

Joe Duffy: We thought long and hard about this, and we started designing the system so that the open source and SaaS work naturally with one another. So, we have a very high attach rate for people who download the open source. 80% of the people that do that actually use our SaaS, which is great, we have a free tier as well for unlimited individual use. And so, it’s only when you get to a team that you start paying, or Enterprise.

We invented this concept, basically pay-per-project
was the previous model. What we found was a few things. And honestly, our hearts
were in the right place. We really avoided per user for as long as we could
because we want the whole organization to be able to use it freely, we don’t
want to stop growing within a group, land and expand is important. But what we
found with per project is, no two projects are alike.

Especially in a world of microservices, it’s very
common to have mega-projects sitting alongside thousands of little tiny projects.
And we didn’t want folks to feel like their architectures were influenced by
the pricing model. That felt like an anti-pattern to us, and that was sort of
some of the feedback we got on that pricing model.

Although we really did want it to be, “Hey, you pay for what you use.”, and the idea was, “Hey, if you’re using more, you’re seeing more success, and so, you would expect to be paying more.” Per user was just easier for people to model out, easier for people to kind of gauge how much they expect to be spending today versus tomorrow. And frankly, it’s just a familiar model for anybody who’s using a lot of other SaaS products that our customers are using, whether that’s PagerDuty, or Gitlab, or GitHub, or a lot of those other sorts of systems.

I’m not saying per user is perfect, it certainly isn’t, but it’s kind of the least bad that we found today.

SaaS V. Software Revenue

Mike Schwartz: Is most of the revenue from the SaaS platform or from the Enterprise software product?

Joe Duffy: It’s actually a good breakdown, you know. Honestly, it’s about
50/50. Now, it’s importantly, our Enterprise product is actually sold as a
SaaS, as an option. So, you can either run, you can use the SaaS as the online
hosted version, or you can use a self-host, on-premise version of that.

I’ve been pleasantly surprised at how many people are willing to use the online SaaS because the COGS for us to deliver that service are just so much lower than having to do on-prem support, and installation, and upgrades. And I think my takeaway there is, people now, even more so than even two, or three, or especially five years ago, they are used to depending on cloud services, whether that’s GitHub, or AWS itself, or pick your favorite SaaS.

I think these organizations are getting more
comfortable with that sort of dependency. We also architected the system, so
that you don’t need to share PII, or Cloud credentials, or anything like that
with our SaaS. So, when we go through a security review with one of these
Enterprises, they almost always walk away comfortable with where we’ve drawn
those boundaries.

Single Versus Multi-Tenant

Mike Schwartz: In your SaaS offering, would you say it’s a single-tenant design,
where, each customer has their own sort of database and infrastructure, or is
it a shared multi-tenant type of platform?

Joe Duffy: It’s primarily multi-tenant. There are some resources that are per organization, things like, we have a Secrets Management element to the product, and each organization gets their own dedicated hardware encryption key for example. But for the most part, it’s a multi-tenant architecture, unless you use the self-host version, in which case, it doesn’t talk to any shared resources, it can run entirely behind your firewall, it never phones home, so kind of have those two basic models.

Is Pulumi Open Core?

Mike Schwartz: Would you say that Pulumi is open core?

Joe Duffy: I don’t say that, and although some people tell me I shouldn’t be
so pedantic on this point because it’s a familiar model to people, but we don’t
hold things back from the open-source platform. So, the way I see it is, the
entire Pulumi platform is open source.

So, you can use Pulumi entirely offline, and you’re not missing out on any features that are in the platform itself. It’s just that we have a SaaS product that you can choose to use. And that service itself is not open source. So, it’s almost like sort of GitHub. GitHub, you get the Git tool, Git is 100% open source. And then, you’ve got GitHub, and GitHub is a SaaS that you can choose to use or not when you’re using Git, often it’s the easiest way to go.

But that thing is not actually open source. So, that’s the model that we have adopted, where the SaaS, and importantly, the SaaS provides value. And that’s the other thing, where I kind of have some qualms about, where we’re not artificially hampering your experience. The SaaS is there, and you might pay for it because it actually provides significant value that’s worth the money. It’s not that you’re forced to pay for it. So, that’s I think a key distinction as well.

Has Open Source Materially Helped The Business

Mike Schwartz: SaaS provides a lot of the features of a try by fly. So, has
open-sourcing really materially helped the business?

Joe Duffy: Yes. I would say especially in the space that we’re in. And I
think it would be different for different SaaS products. Like, if you look at
PagerDuty, there was something where everything is about the SaaS, and there
might be some ancillary tools around it – we’re sort of the inverse of that.

I think it’s table stakes for our space, for
developers to change the way they’re writing code, for infrastructure teams to
bet their whole organization on this – they need to have something where they
have confidence that they’re always in the driver’s seat. And if they need to
take things and go, they can do that. So, that was important to us.

The community I mentioned, everything is about community
for us. Because of the bet on real programming languages that we made, we allow
people to share and reuse packages and contribute to the ecosystem – we have
tons of extensibility points. So, if you want to — we’ve had community members
bring up, integration with Datadog for example, great, you can do that sort of
extension.

If you want to integrate with Spinnaker – we just did a Hackathon with Armory a couple weeks ago, where, if it wasn’t open source, that vibrant ecosystem around it just would have never come to be, and that is essential not only today for how we scale the business, but the long-term sustainability and differentiation of the company itself in large part depends on that.

Foundation?

Mike Schwartz: I was reading today about Google, looking at different foundations, where they might contribute Estio. And I’m wondering, when you have an open-source product, and you’re also hosting it, it’s sort of like enlightened despotism. You know, you’re controlling the roadmap, and you’re making the code open source, but that could always change. We’ve seen a change in some companies.

What are your thoughts about a long-term – does
Pulumi ever move to a different governance model, where the roadmap almost becomes
part of the community too?

Joe Duffy: I think, never say never. It’s not something that we’re looking at now. I would say if the community takes us in that direction and it’s important to the community, we would definitely go in that direction.

There are a few things. Like, one, we are open in our planning process, we are open with our roadmaps, we are very community-oriented, and how we do all of that. And so, I think, because of that, our end-users feel like they’re part of that process, probably even more so than if it was in a foundation, frankly.

Because a lot of times, in foundations, there
are special interests. They’re just not as visible. I think Google definitely
has some influence in the CNCF, and so, it’s not a bad thing. You kind of have
sponsors, you can have people in the driver’s seat, but I’m just saying it’s
not, like, in one model you have no influence, in the other model you do have
corporate influence – in all the models you have that level of influence. And I
think, really, our community trusts us, and our task now is to make sure we
preserve that trust and nurture that trust.

But if there are strategic alignment in projects, I think we would be more interested in partnering up with a foundation. But it’s not something that’s on the immediate radar.

Team

Mike Schwartz: Switching tracks a little bit, is most of the team in Seattle?

Joe Duffy: Yeah, we’re about one-third distributed as far as Europe, East Coast, sort of all over the world, but the two-thirds of the team is here in Seattle.

Mike Schwartz: What are your thoughts about growing the team in the future?

Joe Duffy: The situation, at least at the time of the recording, with the
Covid situation, we’re all getting really good at working remote. And that foundation
of starting with a third of the team being remote, I think instilled a lot of
the foundation we needed to be successful in this new environment.

I wouldn’t say we’re actually suffering too much from it. And I think, if anything, it’s actually helped with our existing remote employees feel like they’re more included in the daily dialogue, we’ve introduced a lot of new practices.

So, in terms of growing the team in the future, I think we’re going to be a lot more flexible in terms of, I don’t know, if we’ll go 100% all remote, you know. I think some people have said they actually enjoy working with people in person, but I think we’re definitely going to be a lot more remote going forward.

And frankly, from here, most of our focus on growth is in the go-to-market side of things. We’re Series A- funded company, we’re looking to that Series B in the not-too-distant future. And really, as we start to build more scalable and repeatable go-to-market motions, we’re going to scale up marketing, we’re going to scale up sales, and so that’s really the focus for us, at least for the next 18 months.

Partnerships

Mike Schwartz: Are there partnerships right now that are critical to Pulumi
as business model?

Joe Duffy: I would say all partnerships have been essential. And we’ve done
a fair bit of partnering. And that’s an area that, as we look to repeatability,
I think one of the challenges is, sometimes I say, “Hey, we’re really good at
standing on the top of our own roof, shouting into a megaphone in our own
neighborhood, like writing blog posts and tweeting to our existing followers,
and nurturing our existing users and helping them be successful – you got to do
that. That’s super important.

But what we’re starting to get better at now is leveraging those partnerships to, you know, get into adjacent channels, where there’s actually natural synergy between them. I think that it’s a tough thing to do, you got to nurture those relationships over the long term, but then, some of them start to pay off.

So, the major cloud providers have been great partners with us, but we’ve intentionally built our system to integrate with a lot of other systems, whether those are source control systems, CICD systems, cloud infrastructure providers – in each one of those is a partnership opportunity that we’re just now starting to learn how to leverage to basically grow top of the funnel, while also giving customers a more complete solution because each of these is just really one piece of the puzzle.

Pandemic Impact On Open Source

Mike Schwartz: As you mentioned, we’re recording this episode in April 2020, in the midst of this unprecedented global pandemic. Is there a scenario where the new world that’s emerging will somehow be more fruitful for open-source startups?

Joe Duffy: I think we’re learning to flex a bunch of new muscles, especially when it comes to marketing, more online digital campaigns, events were huge for us in the past. And I think in open-source generally, QCon, it’s great to connect with your colleagues and learn what they’re up to, see how you can incorporate their ideas into what you’re doing.

DevOpsDays, a great conference that’s very open source oriented, that I personally went to almost a dozen of them last year – those things aren’t happening now. They’re all moving online, and I’ll say it’s a little bit of a stark contrast. It’s not quite the same watercooler kind of informal conversation, it’s kind of hard to have these large group settings, connecting over Zoom, where it’s 30 people on a screen, taking turns, talking to each other.

I think we’re going to invent tools, we’re going to invent new ways of basically moving that conversation online. I think we’re going to come out much better afterwards in that dimension. And that will benefit marketing, that will benefit open source because open source really is about that community dialogue. So, yeah, I think we’ll come out stronger afterwards.

Advice For Open Source Entrepreneurs

Mike Schwartz: Any advice for new entrepreneurs who are launching a business with open source as part of their business model?

Joe Duffy: I would say, we thought long and hard about the monetization strategy. I think the temptation is to launch the open-source project as soon as possible. And frankly, that is a good strategy, you always want to get out there sooner, so you can start getting that sort of virtuous cycle of customer feedback and community building. But it’s really tough to get in a situation where you’ve launched an open-source project is growing vibrantly, but you have no idea how to monetize.

For me, I wanted to build a product company, I didn’t want to build a services organization. That’s a very different playbook. It’s low-margin, lots of people, very expensive to get to scale. You really want to focus on selling product. And if you’re going to do that, it requires really thinking deeply about where that boundary is between what’s free and what something people would pay for.

And my advice is, the thing that people pay for has to be something of value that they want to pay for. You can’t trick somebody into paying for something – it really needs to be valued. And that means you can’t necessarily open source 100% of your value.

Closing

Mike Schwartz: Joe, thank you so much for sharing all these insights today,
and thanks for your time.

Joe Duffy: Thanks, Mike. I had a good time. I appreciate the chat.

Mike Schwartz: Special thanks to the Pulumi team for wrangling Joe onto the podcast. Editing by Ines Cetenji. Transcription by Marina Andjelkovic. Cool graphics by Kamal Bhattacharjee. Music from Broke For Free, Chris Zabriskie and Lee Rosevere. The podcast. Our Twitter handle is @fosspodcast.

Next episode we talk to Tracy Miranda, Director of Open Source community at CloudBees, the company is behind Jenkins. Stay safe everyone. Until next time, thanks for listening.

James Watters, SVP, Products at Pivotal Software, is a veteran of the unix and open source software business. With a broad breadth of products, including Java Spring and many other essential tools for developers, Pivotal has built a business of enormous scale in record time.

Intro

Michael Schwartz: Hello, and welcome to Open Source Underdogs. I’m your host Mike Schwartz, and this is episode 40 with James Watters, SVP of Products at Pivotal.

Pivotal is probably best known for the success
of Spring, the most popular way for developers to write Java applications, but
they built a great business around the Pivotal platform, which enables large
businesses to manage a unified, multi-cloud software infrastructure.

Pivotal is a little different than your typical
open-source startup. Spun out of EMC and VMware in 2012, and IPO in 2018, and
shortly before I recorded this episode in August of 2019, VMware announced the
definitive agreement to acquire Pivotal, a combination that’s expected to close
in 2020.

James makes the case that open source is winning
because it’s innovative feature-rich and enterprise-ready. He has a deep
understanding of both the technical and business mechanic that make open-source
companies tech. I’m sure you’ll enjoy this interview, so without further ado,
here we go.

Pivotal Background

Michael Schwartz: James, thank you so much for joining the podcast today.

James Watters: Great to be here, Mike. Hi.

Michael Schwartz: So, you were trying Pivotal in 2012 when it was formed, and for the listeners who don’t know the backstory, maybe you could just drive a little bit about how that came about, and perhaps about how it’s coming full circle to some extent.

James Watters: I was fortunate enough to join a open-source research and development team at VMware in 2010, working on an open-source project named Cloud Foundry, and we didn’t really know what it would become as a business. It ended up, they decided to spin that out along with another open-source project called Spring Source, or Spring, into its own company, and that was one of the foundational product elements of the company called Pivotal.

Michael Schwartz: What’s your current role with pivotal?

James Watters: I’ve done a lot of product work at Pivotal. I’m currently SVP of Strategy, focused on new parts of our product. I’ve been focused on things like streaming, container-as-a-service, function-as-a-service, all the emerging areas of our product.

Size Of Product Team

Michael Schwartz: Just to give everyone a sense of the scale, could you give a rough estimate about how many product managers are Pivotal, and the total size of the product team?

James Watters: It’s pretty expensive. There’s hundreds and hundreds of engineers that work on the platform at Pivotal, and I would say 50 full-time product people working and supporting them.

How The Product Management Has Changed In The Last 15 Years

Michael Schwartz: When you were at Sun a while back, you were a product manager of Solaris, which is a pretty epic assignment for those of us geeks who revere Solaris. Since then I’m wondering, could you comment about a little bit about how has been an open-source project manager evolved? Like, what’s different now?

James Watters: That’s a great question. The cycle time was so different on Solaris. And that was an 1100-person engineering team. And then, on the kind of customer-facing product front, I think we were under 10 people. It was very much engineering organization, product provided a bit of input and amplification of key customer themes. We worked on often multi-year release cycle.

In the new world of open-source, the community input comes so fast. It’s a different release cadence. Our core platform PCF at Pivotal, we released every quarter. And that was a big mindset change for me versus some of the older world at Sun. It was just how fast everyone expected you to respond. It’s not uncommon now to meet with a client. And in a matter of weeks, we will have a feature changer update shipped to them. It’s a completely much more iterative world of continuous delivery, both at the platform as well as what we’re trying to inspire our customers to do for their end users. So, I think that’s dramatically changed since.

How Smaller Organizations Can Improve Product Management

Michael Schwartz: If you’re not Sun, you are VMware Pivotal, but you are so much smaller. Do you have any suggestions for some of the little things that you can do, or that it open-source company might do around product management?

James Watters: I think that’s really opening a question, and I don’t want to speak conclusively on it, but I think what I’d say is, there’s kind of two ways of coming at it. And my specialty is always being understanding the enterprise organization that the product fits into.

There was a point in our journey, where we felt adding
additional features around security would probably be neutral to the developer
audience that was using the platform, but what actually bring like the chief
security officer and her team deeper into the conversation.

Suddenly, we approached a few banks, and we
said, “What if we could rebuild this entire platform infrastructure every day for
security?” And we had a really brilliant product person at the time named
Justin Smith, who let this initiative to articulate the idea of the much more ephemeral
approach to the platform.

I think the reason I mention this is, you could
have gone deeper on just developer experience, but by finding that other
constituent in an enterprise that come to the negotiating table around why
we’re giving money to this company, that really changed the game for us and a
few clients, because the chief security officer was now also an advocate.

I think it’s challenging you doing open-source products because you might get a lot of feedback from your immediate community and immediate users. But in order to sell the products to a larger organization, you need to think about articulating investments to a broader set of constituents.

Pivotal Products

Michael Schwartz: You mentioned PCF for Pivotal, Cloud Foundry. For those who don’t know, maybe you could just tell us a little bit about what that is, or also walk us through some of the other product offerings at Pivotal.

James Watters: I’ve been fortunate enough, Palmer at VMware hired couple of Google engineers in 2009-10, to come build this platform out. It was really like what you might call the Cloud Native platform world today.

At the time, there was no such thing as
container-as-a-service, and at the application level, there really was no micro-services,
and continuous delivery was sort of a very radical idea of enterprise. It was
sort of the first platform built with the container first design, built to
enable continuous delivery of things that look more like micro-services than
monolithic applications.

And kind of was the first investment in this
Cloud Native space, in terms of application platform and culture, all coming
together in a platform.

That was really what PCF did, and we were able
to scale it from zero sales in 2012. Or the spin that was first contemplated to
hundreds of millions of dollars in sales, and ultimately the background of a
public company.

Market Segmentation

Michael Schwartz: Cloud Native is a broad horizontal market. Do you segment the market at all by vertical industry or use case?

James Watters: This is another thing around products. For me, products strategy is that I do think that vertical use cases are critical. I’ll give you two examples. In the banking world, there is a huge focus on Java, because it’s traditionally a Java-centric custom application world.

Banks were always willing to invest in the
high-end applications that often was built by Java developers.

When I first started and till this day, banks
are, I would say, the number one language in banking is Java. They are very
security-centric, they operate in a highly-regulated world, and they tend to be
very hybrid cloud. There’s very few banks that run public only.

They were a tremendous fit for the design of
PCF, both from support for Spring Boot as well as its core security
differentiation.

We absolutely thought of a lot about banking, insurance,
regulated industries. Then, manufacturing and industrial was a little bit
different space. There you had a lot of the IoT world, you had streaming data,
you had a completely learning how to build software for the first time way of
engaging, where industrial companies were just getting started on major
software investments.

I definitely think about vertical segmentation. I
think for anyone who’s contemplating a sort of customer first approach to
product thinking, vertical segmentation is a good early model to take on.

How To Decide What To Open Source?

Michael Schwartz: Pivotal has 73 projects in GitHub, and I’m sure that there’s more in private repositories – how do you decide which projects to open-source?

James Watters: I think, by and large, we tend to be an open first-style company, as I mentioned on the Andreessen Horowitz podcast awhile back, I am an advocate for sometimes keeping the UI, closed-source can be a simple way of differentiating between the pure-community efforts and the final enterprise products. But in general, we’ve tilted towards open source first.

That’s also been a key part of our relationships,
like I mentioned, with certain banks.

A lot of the core security infrastructure of the
platform was all kept open source, because the banks felt more comfortable
consuming a platform that was opened first, even in those core areas.

Value Prop

Michael Schwartz: When you have a lot of projects, is it difficult to position the value proposition of the company?

James Watters: That’s a great question. If you think about how many projects you want to take on, like say, MongoDB is a fairly focused company. One core thing, Elastic are fairly focused company, but you get into the platform world, companies like HashiCorp are very successful at doing multiple projects. I think Pivotal is probably one of the broader breadth open source company is out there, certainly Red Hat has a pretty broad breadth. You hit a point where you become the platform provider of choice for their next generation of design, and actually the pressure comes to do more and more and more.

One of the biggest pressure points for us was
always like, “Okay, we love this as an application platform. Now, provide us
the whole universe of data services on the platform.” And so you have to
achieve a certain critical mass to have the scale to invest like that.

But I do think that in enterprise segmentation,
it’s powerful when you can start to have people accept the offerings you do
have. And then, the biggest pressure is, “And now add this, so I can have one
coherent approach. And I think that that’s something really important for open-source
companies to think about it. Like, “Look at how Amazon operates. They are not a
federation of hundreds of little hosting providers all coming together. They
really have that sort of single point of interface to all of their abstractions.

I think that’s an interesting dynamic in the
world right now. Open source is like, how broad you should go in your
portfolio, do enterprise buyers favor that, is it better to be lower and single
products – that’s something we discussed.

Pricing

Michael Schwartz: With a lot of products, containers, Cloud Native services, it seems like it’s harder than ever to figure out how do you price. There’s more things you could gate on and the more elasticity is given, I know us, at my company Gluu, a lot of challenges because of CPU that depends upon the time of day. Can you talk about the evolution of pricing, and did you get it right initially, or did you have to make some tactical adjustments along the way?

James Watters: I think that’s a great question. I think it’s never easy or straightforward, we made a decision that we were going to go after the largest thousand companies in the world predominantly. We were going to supply a lot of technical resources to them, to ensure that they were successful with our product, and very much be an outcomes-focused company.

I think we intended to price at the higher end
of the market, and that was a very deliberate choice. And I think as we’re
growing now, we’re seeing more opportunity to start to segment the offer. To
have a more transactional approach, we reintroduced the container-as-a-service product
that didn’t have as many features as the full platform, but was something that people
were ready to pay for more on a transactional basis.

I think that there is this tension between the
desire to have a broader platform versus to be more transactional, and that
very much comes back to customer segmentation. I would think of pricing in
terms of how transactional you want to be, and then what the customer really
expects out of you to make them successful.

Like, what does customer success really look
like – it has to be at the core of your pricing model. If the prices are really
low, and they’re not successful, that’s actually not on either of your interest.

Competition

Michael Schwartz: Does Pivotal actually have competitors?

James Watters: I don’t think that Pivotal has a company that is assembled just like us. We have some unique assets, one of the reasons we were successful in enterprises is, we have the number one way that enterprises build apps in the Spring Boot.

So, when it comes to like
how enterprises are building applications in the Spring Boot, it’s probably
easily the number one, and it might be over 50% market share of net new enterprise
applications today.

There’s not another
company that has that. We also had a very big git, and we were owned by kind of
the Dell VMware family of companies ultimately. So, we’ve always been able to
go to market with them, but we really still did have to earn our own way. But we
could get introductions.

I think all of those
things came together in a way that allowed us to build a higher-end platform to
focus on the top 2000 companies in the world, and to go make them successful, and
to price and package accordingly.
I think one of the challenges right now for smaller open-source companies is, these
cloud platforms that are open-source, they keep adding features that are pretty
high rate. So, you may think that one day, you have a company, and the next day,
that’s a feature of a cloud platform. And I think that’s attention.

Certainly, in the
service mesh world, you see disruption of kind of traditional networking and
API management, coming in the way that people are adopting a service mesh, etc.
Is that a company, is that a platform – I think that’s a very dynamic part of
the market right now. It’s pretty important, and I don’t talk about it too much,
but I really do enjoy working on open-source projects because they can have a
breadth of impact that’s pretty unimaginable to something that you have to
commit a sales transaction and for software before someone can use it.
We have an asset at Pivotal, Spring Starters, and they’re the number one way
that people get started with a new job application. And that’s start.spring.io.
You start a new job project there.

Every two seconds a
developer on average is going there to kick off a new project.

And the top three
countries for it are China, United States, and India, but these are the kind of
impacts that open-source can have worldwide, deep into developer impact that
you can never do with closed-source only, enterprise sale only products.

I think just the
unimaginable breadth that open source can get you in ubiquity, that it can get
you in the modern world is stunning. So, that’s what I’m humbled to work on. I
think the challenge is then like, “Well, how do you make sure that the largest
5,000 organizations in the world are contributing to that?” And that’s where I
do have a passion for enterprise monetization of open source, and finding ways
of partnering with those organizations, and packaging, and pricing things, such
they feel that there’s good value. And partnering with these open-source
companies and making them their most meaningful platform.

I think I’ve got there two minds, number one, open source is super important just from a long-term impact the world, it’s harder to work on projects, they can have a bigger one than open source ones. And then there is the challenge of like, “Well then, how do you build the economic model around that when it’s so ubiquitous to begin with? That’s the kind of challenge that I’m taking on, and I’m humble to be able to work on open source for enterprises for that reason.

What Types Of Software Should Be Open Source?

Michael Schwartz: Do you think that certain types of software lend themselves to being open source?

James Watters: I would say that the developer workflow today – and that’s not my line but I like it – it starts with “Git clone.” And I think any saying, where a developer is initiating a project in this era, it better be either a really easy to use API, I think Stripe certainly has proven that, or, it better be something like start.spring.io. Or, git clone, something that a developer could just go grab in a permissionless kind of way. And Adrian Cockroft at Netflix said that, back when he was at previous companies, there were these big architectural debates for months before a project would start. And that in Netflix you really implemented the running code talks. It’s all about running code. I think that that is the reason why open source is really powerful for anything having to do with developers.

And then, on the infrastructure level, open
source has become the most profound way that large vendors collaborate. If you
look what’s happening in the Kubernetes community, where you have every major
public cloud contributing to Kubernetes, IBM acquiring Heptio to make major
contributions to Kubernetes, in infrastructure, open source has the way that
these, what you might have had standard bodies before, there’s sort of like a
running code way that large vendors are collaborating. Both, in the end-user
developer space as well as in the infrastructure space, open source had a huge
impact.

But if you think those worlds are slightly
different, the dynamics of start.spring.io, which is very end-developer focused
versus the way that every public cloud is normalizing how they run Kubernetes
are slightly different, they’re all open source but they have slightly different
behaviors and attributes. And it’s kind of fascinating to see database
companies like MongoDB a little bit different than the way that the Kubernetes
community is operating.

Do Enterprises Care About Open Source?

Michael Schwartz: Do you think that customers actually care about open source? I mean, large enterprise customers?

James Watters: I think large enterprise customers absolutely have seen the tremendous benefits in just frankly the innovation velocity of open-source products. And I think the biggest change is that in the early days, open source was a cheaper version available for free of the enterprise products. That’s what I think it was especially hard to monetize.

If you’re just going to
be the cheaper thing and the low-cost provider, and not the premium product, a
lot of enterprises might look at that and say, “Hey, we’re an enterprise, we
can afford to buy whatever we need. We just really want innovation leverage, like
we want the best product.

But I think there’s a
new whole category of products, or there’s only an open-source player that is
creating it. Like PCF was the kind of first micro-services platform in the
world for enterprises. And it was built a 100% open source. It was both the
market leader in terms of features and the open play.

I think the open-source
market is changed, where there is room to be both innovative, or the
expectation is that they’re both innovative, higher-end, feature-rich as well
as enterprise-ready – all of that is expected from open source today. I think
that’s where the innovation is happening.

If you look – here’s an
example – Amazon has a service Kinesis, which is how they were doing messaging,
and it did a pipelines. And now they’ve switched that to a managed Kafka
service. They had to do that because the innovation was really happening in the
Kafka community in open source. Even on Amazon scale, they couldn’t keep up
with it.

I really find that to be the best part of the market right now is that you can’t out-innovate the open-source players.

Cyclicality Of Centralization

Michael Schwartz: It seems like there’s sort of a cyclicality between centralization and decentralization. For example, a couple years ago, everyone was at full tilt towards “Go to the cloud.”, and now, it’s almost like with Kubernetes and other technologies – is there any shift away towards maybe bringing more of this type of functionality in-house, and does that help a company like Pivotal?

James Watters: When I talked to CIOs about this, I tried to help them deconstruct the current cloud market, and what I told them is, “Public cloud is not one thing. It’s really three different zones of features that you need to think about. The first is the commodity layer, which is, “Hey, I’m just buying virtual machines, networking disc, the basics, and that’s kind of where public cloud started.

There, you can use a platform like Kubernetes,
and run those system resources in similar ways, if not identical ways, across
public-private, hybrid multi-cloud. So, I think Kubernetes has done a
tremendous job of making those system resources normalized across all the
clouds.

Then, I think there is this emerging space
within the Cloud Native community around the open-source developer focused
projects that run on Kubernetes, like Kafka, like Spring Boot, really like Pivotal’s
platform. That’s where the developer innovations come. That’s like the open developer
innovation community, that’s number two.

And the number three is, they selectively are
these managed services like Google Spanner, Google Machine Learning, or you
might be ahead of the market, where there might not be an open play there yet, where
Spanner requires dedicated fiber networks between data centers to make the
database magic work. So, there are areas we are the managed cloud or head.

Our perspective is that innovation in the core, where
you are really arming your developers, continues to happen in open source. Commoditization
can be achieved through technologies like Kubernetes running in a normalized
way across clouds.

And then, technologies, like the Open Service Broker,
relay to buy these managed things. Long story short, I think what’s happening
is, the CIO’s are getting smarter about deconstructing cloud from this
monolithic idea of “I go all in one cloud.” to like, “How do I selectively use
what’s best about each cloud?” I think open source is playing a huge part of
that.

Should Open Source Be Less Expensive?

Michael Schwartz: You touched on this a little bit before, about how open-source software maybe should be cheaper. I think that there is a sort of perception for some reason that even though you get more rights with the license that the software should be less money – do you think that that is changing, or is that something that is an industry we need to work on with customers?

James Watters: I’m a maybe a contrarian here, my dream was always a very open product that generated a lot of value that enterprises were excited to invest in the platform partnership in. And, essentially, I don’t think that open source should have to have cut rates levels of investment into research and development vs. closed source.

My contrarian nature there says, “If you really
have the right relationships with these customers, they’re going to be just as
happy giving an open-source provider money as they are giving Oracle money.” I
mean, if anything, I think that open-source partnerships are valued in a more
profound way in the modern enterprise that might be even happier to give you
more money than Oracle.

I do think that that something is happening. That
also comes back to how these open-source companies engage with these large
enterprises, are they focused on them, do they understand their vertical needs,
do they put security first, are they able to measure the outcomes that are
achieved with their platforms?

Closing Advice For Entrepreneurs

Michael Schwartz: Last question. Do you have any advice for entrepreneurs who are starting new ventures based on open-source software?

James Watters: I think my advice would be, if you really develop a community around your open source, you’re one of the luckiest people in the world. That’s a tremendous gift. Save and invest in that community, but also spend some time understanding how that technology fits into the value chain, in the largest thousand companies in the world, and investments they are making in technology.

Try to balance the needs of the developer who’s approaching
it from a ‘git clone, let’s get started’ perspective, as well as the more
complex matrix or matrices of a large enterprise organization, and what they
need across security, operating, certainty SLAs, etc. If you can get those two
forces right, then I think you’ve got a remarkable opportunity. But I do think
that monetization, and ultimately funding a great R&D team behind your open
source project, takes a balance side towards both.

Closing

Michael Schwartz: James, thank you so much for taking your time today in this really pivotal moment in Pivotal’s trajectory.